2018 (6) TMI 317 - AT - Central Excise

CENVAT credit - input services - Goods Transportation Agency service utilized for outward movement of finished goods - place of removal - recovery alongwith Interest and penalty - Held that - Place of removal is relevant solely for determination of point of levy and for computation of the duty thereon - it is quite possible that place of removal may well be the premises of the buyer and levy would include the entire costs for computation of assessable value. It is also quite apparent that this has not been considered in the proceedings before the lower authorities - matter remanded for reconsideration - appeal allowed by way of remand.

Summary

Issues: Disallowance of CENVAT credit on 'goods transportation agency service', recovery with interest, penalty under section 11AC of Central Excise Act, 1944

In the appeal by M/s Hitesh Plastics Pvt Ltd against the order-in-appeal of the Commissioner of Central Excise (Appeals), Nashik, the primary issue was the disallowance of CENVAT credit amounting to ?2,39,324 between March 2010 and March 2011 on 'goods transportation agency service' used for outward movement of finished goods. The dispute also involved the recovery of the disallowed credit along with interest and the imposition of a penalty of a similar amount under section 11AC of the Central Excise Act, 1944.

Analysis:

The original authority and the impugned order emphasized that the definition of 'input service' in rule 2(l) of the CENVAT Credit Rules, 2004 limited the availment of credit to services utilized up to the place of removal. The appellant had availed the services of a 'goods transport agency', a fact not in dispute. The Learned Authorized Representative cited precedents like the Tribunal's decision in Maharashtra Scooters Ltd and the Supreme Court's ruling in Commissioner of Customs & Central Excise, Nagpur v. Ispat Industries Ltd to establish the significance of determining the place of removal.

The appellant's Counsel argued that the duty liability on finished products was calculated based on costs inclusive of transportation up to the buyer's premises, as clearly indicated in purchase orders and invoices. It was contended that the lower authorities had not adequately considered these aspects. The intention of the CENVAT Credit Rules was highlighted to allow credit for services used directly or indirectly in the manufacturing process, including costs up to the place of removal where central excise duty liability arises.

The judgment emphasized that the place of removal is crucial for determining the point of levy and duty computation, potentially including the entire costs for assessing value. The Court noted that the lower authorities had not considered whether the place of removal could indeed be the buyer's premises and if the levy should encompass the total costs for duty computation. Consequently, the impugned order was set aside, and the matter was remanded to the original authority for a fresh determination.